GAO-12-918, “COAST GUARD, Portfolio Management Approach Needed to Improve Major Acquisition Outcomes”

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September 26, Fiercehomelandsecurity posted a story (“GAO: Not eliminating two National Security Cutters will cause ‘difficult choices'”) on a recent GAO report, “COAST GUARD, Portfolio Management Approach Needed to Improve Major Acquisition Outcomes” (download the report, GAO-12-918 (.pdf)). While the post focused on the apparent recommendation not to seek to build units seven and eight of the National Security Cutters, there was much more to the report.

Basically the GAO is saying that the Coast Guard is not using a systematic approach to its acquisitions, that much of the information that its budget is based on is out of date, and that the Coast Guard is allowing the Congressional Budget Process to determine its priorities.

I’m going to quote the report liberally:

What GAO Found

“The planned cost and schedule of the Coast Guard’s portfolio of major acquisitions is unknown because of outdated acquisition program baselines and uncertainty surrounding affordability. The Coast Guard’s approved baselines, which reflect cost and schedule estimates, indicate the estimated total acquisition cost of Coast Guard major acquisitions could be as much as $35.3 billion—an increase of approximately 41 percent over the original baselines. However, the approved baselines for 10 of 16 programs do not reflect current cost and schedule plans because programs have breached the cost or schedule estimates in those baselines, changed in scope, or do not expect to receive funding to execute baselines as planned. Furthermore, a continued mismatch between resources needed to support all approved baselines and expected funding levels has required the Coast Guard to make decisions about which programs to fund and which programs not to fund as part of its annual budget process. Both DHS and the Coast Guard have acknowledged this resource challenge, but efforts to address this challenge have not yet resulted in a clear strategy for moving forward.

“The Coast Guard has taken steps through its requirements process—a process that takes mission needs and converts them to specific capabilities—to address affordability, but additional efforts are required. For example, in an effort to consider affordability, the Coast Guard made some capability trade-offs when developing requirements for its largest acquisition, the Offshore Patrol Cutter. But whether the cutter ultimately will be affordable depends on some key assumptions in the cost estimate that are subject to change. At the fleet level, the Coast Guard completed two efforts to reassess what mix of assets it requires to meet mission needs, but neither effort used realistic fiscal constraints or considered reducing the number of assets being pursued. The mix of assets the Coast Guard is acquiring is based upon needs identified in 2005, but the Coast Guard may not be on a path to meet these needs and it has not re-examined the portfolio in light of affordability.

“The Coast Guard has established an acquisition governance framework that includes the following cross-directorate teams: the Executive Oversight Council, the Systems Integration Team, and Resource Councils. The Executive Oversight Council—composed of admirals and senior executives—is well-positioned to delegate tasks to the other teams or obtain information as needed to assist in managing acquisitions. This Council has been active in meeting to discuss individual acquisitions; however, it has not met to discuss the portfolio as a whole. Coast Guard officials told us it manages portfolio affordability through the budget process. GAO’s best practices work has found that successful commercial companies assess product investments collectively from an enterprise level, rather than as independent and unrelated initiatives. The Coast Guard’s current approach of relying on the annual budget process to manage portfolio affordability involves immediate trade-offs but does not provide the best environment to make decisions to develop a balanced long-term portfolio.

——————————————————————–

“Outdated acquisition program baselines and uncertainty surrounding the affordability of the Coast Guard’s acquisition portfolio continue to limit visibility into the current cost and schedule of the Coast Guard’s major acquisitions. Even though the Coast Guard has revised 15 out of 16 baselines in its major acquisition portfolio at least once, 10 of those 15 baselines do not reflect the current cost or schedule of the programs. According to the acquisition program baselines that are approved as of July 2012 and total program cost for programs with no planned funding beyond fiscal year 2014, the Coast Guard is managing a portfolio of major acquisitions that could cost as much as $35.3 billion—or 41 percent more than the original estimate of $25.1 billion—but the majority of these baselines do not reflect the current status of these programs. DHS and the Coast Guard have acknowledged that affordability of the Coast Guard’s portfolio is a challenge, but the mismatch between resources needed to support all approved baselines and anticipated funding levels continues to affect Coast Guard acquisitions. Some of this mismatch could be alleviated by the Coast Guard’s current five-year budget plan which does not include the final two National Security Cutters; however, Coast Guard officials have stated that, regardless of this plan, it continues to support completing the program of record. A decision to pursue the final two National Security Cutters in the near-term budget years could have significant portfolio-wide implications.

In other words, the Coast Guard hopes to buy a really nice dinner table, but can only afford three of the four legs. GAO is telling us we really should be looking a nice little Formica topped breakfast table.

I can see why they would say this, but on the other hand, I can see that the Coast Guard may view it differently. The GAO assumes that the Coast Guard’s AC&I budget will remain essentially the same with minor fluctuations. From the Coast Guard perspective that is a prescription for disaster. It really needs to increase to approximately $2B/year. There is also likely, a fear that if they ask procurement that would fit within the budget, that would be trimmed even more by the the Department and the Administration, and the service would be even worse off.

Costs are greatly dependent on order quantity and time of funding. Is the estimated price of a system to be based on the build rate we need, or the build rate we think we will see? If we choose wrong, the baseline will be wrong and will not reflect reality.

Congress and GAO do recognize inflation rates, but they don’t seem to have recognized that inflation is higher in the shipbuilding industry than in the economy as a whole, so as ship construction is pushed to the right, the projects will get more expensive, even on an inflation adjusted basis.

“DHS stated that future breaches in Coast Guard programs would almost be inevitable as funding resources diminish. (p.17)

“Due to these capability shortfalls, the Coast Guard is at risk of purchasing a fleet that will not be able to close all of the gaps identified following the September 11, 2001 terrorist attacks or fully conduct operations in a presence-based manner. While the 2005 Mission Need Statement presented a business case for the Coast Guard’s future investments, the Coast Guard has not re-examined the value of these assets in light of the difficult affordability decisions likely to come. By continuing to pursue some capabilities and not others without reevaluating the portfolio as a whole, the Coast Guard is increasing the risk that it may not accomplish the goals envisioned in 2005 and cannot ensure it is maximizing the value of the assets it is buying.”

While unmanned systems, and comprehensive maritime domain awareness may have allowed the CG to do with fewer ships, in the absence of these systems we need more ships and manned aircraft.

“Coast Guard program officials also added that the cost estimate for the Offshore Patrol Cutter is optimistic in that it assumes that the cutter will be built in accordance with the current acquisition strategy and planned schedule. They noted that any delays, design issues, or contract oversight problems—all of which were experienced during the purchase of the National Security Cutter—could increase the eventual price of the Offshore Patrol Cutter.”

——————————————————————–

While the (Coast Guard’s) Executive Oversight Council has had opportunities to discuss affordability of the entire portfolio and make informed trade-off decisions, Coast Guard officials told us that all of these decisions are handled through the annual budget process, which also takes into account budgeting for operating expenses. However, the Coast Guard’s current approach of relying on the budget process to manage the affordability of its portfolio has proven ineffective. The preparation of the annual budget request involves immediate trade-offs, but does not provide the best environment to make decisions to develop a balanced, long-term portfolio. As we have previously reported, given that the Coast Guard is managing more programs than its budget can support, and it does not review its portfolio outside of the annual budget process, the Coast Guard has relied on budget decisions each year to drive the acquisitions process. As a result, program managers react to the budget request each year as opposed to having a reliable funding profile consistent with their approved baselines by which to execute their programs. One of the responsibilities in the Executive Oversight Council’s charter is to synchronize projects with planning, programming, budgeting, and execution milestones to align them for successful completion of key milestones, but Coast Guard officials acknowledged that this alignment has not yet occurred.

“Opportunities Exist to Address Affordability through the Requirements Process”

Perhaps there are opportunities to look at alternatives to the platforms in the existing program of record.

The program of record replaces the existing fleet with more sophisticated more capable platforms, but these platforms are also relatively expensive, and cannot be procured in the numbers needed, within the existing budget. But should the budget be fixed at this level?

Essentially the size of Coast Guard’s cutter fleet actually shrank as we went from a 3 mile territorial sea, to a 12 mile territorial sea, to a 200 Exclusive Economic Zone; as we went from doing “courtesy” boardings where we did a little research and swapped dirty magazines with foreign F/V crews, to enforcing fisheries regulations and hunting for drugs of the West Coast of South America. The job has grown immensely but the fleet never did.

The DHS Cutter Study, Trade-offs, and the Case for “Cutter X”

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I have had an opportunity to look a bit more closely at the Department of Homeland Security Cutter Fleet Study, “Options for the Future USCG Cutter Fleet Performance Trade-Offs with Fixed Acquisition Cost,” by Alarik Fritz • Raymond Gelhaus • Kent Nordstromr (.pdf).

The Study

I highly recommend at least the synopsis, which is the first thirteen pages. I think the study is an honest attempt to determine the best mix for the Coast Guard fleet; it is quite well done. Basically it holds cost constant and looks at possible alternatives to build the most effective fleet possible. It builds on work done for the earlier Coast Guard Fleet mix studies, but unlike the CG studies, it looks at alternatives to the program of record. It looks at where the missions are being performed and considers the effects of weather on mission performance in four regions, the Northeast, Southeast, West, and Alaska.

The study considers:

  • trading National Security Cutters (NSC) for more Offshore Patrol Cutters (OPC) (Approx. two OPCs per NSC)
  • trading OPC as currently described for OPCs that have reduced capabilities but retain the seakeeping and endurance of the OPCs (This was postulated but not explored in depth. It did not appear to make much difference.)
  • trading OPCs for a modernized version of the 270 (approx. four mod-270s for three OPCs)
  • trading OPCs for an equal number of LCS (This was seen as a non viable choice because of the higher cost and lower seakeeping and endurance of the LCS)

The problems (and these were recognized by the study) are:

  • Further delays in beginning building ships severely impacts near term capability
  • A major Cutter fleet of only NSCs and mod-270s does not meet the needs for heavy weather capability where it does exist.
  • Because the Mod-270s have as large a crew as the OPCs, a larger number of ships would add to the operating cost of the fleet.

What comes through loud and clear, from this study is that

  • We need ships with the capability to do boat and helicopter ops in State Five Seas particularly in the Northeast and Alaska.
  • In the Southeast and West, where the primary missions are Drug Enforcement and Migrant Interdiction, we are a long way from a point of diminishing returns, that is, mission performance is most directly linked to the number of cutters, increasing in in almost direct proportion to the number available.
  • The cutters ability to launch boats and helicopters in State Five conditions are much less important in the West and Southeast where most of the cutters are normally deployed.

An Alternative

In simplistic terms, while we need some highly capable hulls, we also need even more hulls on patrol, but the additional hulls don’t need to be particularly sophisticated. This leads me to the conclusion to the we really need another option, another class of ship, I’ll call it “Cutter X.” Think of this new class as taking the crew and equipment of a Webber class Fast Response Cutter (FRC) and putting them in a larger hull with more endurance and seakeeping, while accepting lower top speed than the FRC. We can take advantage of the training and corporate experience with the FRCs, if we add similarly equipped larger cutters.

I am going to talk about one possible fleet mix including this additional class. It is not necessarily the optimum mix, I’ll leave that for further analysis, but I think it may illustrate the advantage of including this additional class. For this proposed new mix I believe we can hold acquisition and operating costs constant, ie the same as the program of record. The proposal would trade 24 units in the program of record (2 NSCs, 4 OPCs, and 18 FRCs) for 22 units of this additional class (depending on cost we might get more) and could allow us to:

I’ll compare this possible fleet mix to the Coast Guard Fleet as it existed in 2000/2001 and the fleet in the Program of Record (POR). on the basis of cutter days available and crewing requirements using both conventional and augmented crewing.

Before we do that, what would “Cutter X” look like? The design that I think comes closest to what I have in mind is the French built L’Adroit (also here and here). It is four times as large as the FRC at 1,450 tons but even with far less horsepower than the FRC (7,500 vs 11,600) it still does 21 knots. With the FRCs engines it would likely do about 24. It might be thought of as a modernized 210, in that unlike the 270 it has no medium caliber gun, fire control system, or ESM.

(There are other similar ships that could be used as examples, see the addendum at the end of the post.)

As we have noted earlier, increased size doesn’t necessarily add much to the cost of a ships. Adding only volume, storage, and larger fuel and ballast tanks, I think these ships can be produced for no more than three times the price of the FRCs, perhaps less than twice as much. I don’t have prices for other examples, but for one, BAEs “Port of Spain” class, the original price for  was only $80M each, less than twice the cost of a FRC and that figure included continued maintenance and training for the crew.

Basically my assumption is that the tradeoffs would work something like this:

1 NSC = 2 OPCs = 4 Cutter Xs = 12 FRCs

This equates to approx. prices of: $700M/NSC, $350/OPC, $175M/Cutter X, and $60M/FRC.

Lets compare the Fleets

As a baseline, take a look at the CG fleet as reported in the 2000/2001 Combat Fleets of the World (I happen to have a copy). It included:

  • 12 Hamilton class 378s
  • 13 Bear class 270s
  • 16 Reliance class 210s
  • Alex Haley
  • Acushnet
  • Storis
  • 49 Island class 110s

or 93 vessels including 44 “cruising cutters” to use the old generic term.

The Program of Record if completed will include:

  • 8 NSC
  • 25 OPC
  • 58 FRC

or 91 vessels including 33 cruising cutters.

The proposed alternative mix would include:

  • 6 NSC
  • 21 OPC
  • 22 Cutter X
  • 40 FRC

or 89 vessels including 49 cruising cutters.

Cutter Days AFHP and Crew Requirements:

For the analysis below I have used the following as the personnel allowances for the new classes:

  • NSC 113
  • OPC   90 (still to be firmed up)
  • FRC    24 (includes two extra junior officers assigned to gain experience)

The personnel allowance for new class could be as little as 30 but is likely going to be more, if only as an opportunity to provide more at sea experience. Using the assumed personnel allowances and the trade-off identified earlier, the proposed mix would require no more personnel than the program of record unless the personnel allowance for “Cutter X”  is more than 46. At most the personnel allowance should not be more than that of the 210s. My figures may be out of date, but at least at one point that was a crew of 62. I’ll use this as the upper limit.

The 2000/2001 fleet theoretically could have provided 8,140 cruising cutter days away from homeport (AFHP) (44 cruising cutters x 185 days) and would have required a total personnel allowance of 5,509.

Without augmentation, the program of record would theoretically provide 6,105 cruising cutter days AFHP (33 cruising cutters x 185 days) and require a total personnel allowance of 4,526.

With Augmentation (increasing their personnel allowance by a third and running the cruising cutters 230 days/year) the program of record would theoretically provide 7,590 cruising cutter days and require a total personnel allowance of 5259.

Without augmentation, the proposed mix would theoretically provide 9,065 cruising cutter days AFHP (49 cruising cutters x 185 days) and require a total personnel allowance of between 4,188 (assuming a crew of only 30 for Cutter X) and 4,892 (assuming a crew of 62 for Cutter X).

With Augmentation (increasing their personnel allowance by a third and running the cruising cutters 230 days/year) the proposed mix would theoretically provide 11270  cruising cutter days AFHP (49 cruising cutters x 230 days) and require a total personnel allowance of between 5264 (assuming a crew of only 30 for Cutter X) and 6203 (assuming a crew of 62 for Cutter X).

What about the loss of FRCs? The proposal would trim 18 FRC from the POR. They are projected to operate up to 2500 hours per day. If we assumed that all 2500 hours were devoted to offshore cruising for the 18 additional units, that would add 1875 days AFHP to the POR for a total of 7,980 days AFHP for the un-augmented fleet and 9,465 days AFHP for the augmented POR. (disregarding the 40 additional FRC that are included in both proposals).

In summary Cutter Days Available:

  • ————————————————–Un-Augmented———Augmented by 1/3
  • 2000/20001 (cruising cutters only)                     8,140                            N/A
  • POR (cruising cutters only)                                 6,105                          7,590
  • POR (w/1,875 additional FRC day AFHP)           7,980                          9,465
  • Proposed Mix w/Cutter X (cruising cutters only) 9,065                        11,270

It looks like this alternative provides an improvement of at least 13% over the program of record, possibly as much as 48.5% depending on how you view the FRCs as a patrol asset. It appears that the un-augmented version may be superior to the augmented version of the program of record while using far fewer people.

Is it doable? What is the timing? How would it mess with other programs?

Cutter X production could ramp up as FRC construction trails off. If we are unable to increase the FY2013 from the current two units, that will put the program at 20 units funded. With no NSCs planned for FY 2014 and 2015, hopefully there will be funding for six in FY2014. Out-years, beginning in FY2015 will require a new contract to complete the additional 14 units proposed. Assuming six units a year, in FY 2015 and 2016, the last two would be funded in FY2017.

If the CG starts soon they could fund the prototype unit of Cutter X in FY2017. L’ Adroit was completed in approximately 13 months, so it is at least theoretically possible the first unit could be delivered well before the first OPC (expected FY2020). Replacing the FRC in the budget, two units a year could be funded in parallel with OPC construction.

Addendum: Other Patrol Vessels similar in concept:

File:HMS-Clyde Fox-Bay.jpg

HMS Clyde, 267x45x12, 8,250 HP 21 knots, crew 42 + accommodations for 20 more, endurance 7,800 nmi @ 12 knots, 1x30mm, Flight deck for up to Merlin (16 ton helicopter)

HMS Tyne (P281) Offshore Patrol Vessel at sea

British River class OPV (UK) (and here), 261x45x12, 1,677 fl, 5,532 HP 20 knots, crew 30 + accommodations for 20 more, 1x20mm, no flight deck or hangar

File:T&T Port of Spain-1-tonal.jpg

BAE’s Port of Spain class  (Brazil and Thailand) (more here), 264x44x12, 1700 tons,  9,700 HP 25 knots, crew 34+5 trainees, endurance , 1x30mm, 2x25mm, Helo deck, but no hangar (Thai version HTMS Krabi has a 76mm Oto Melara and 2x30mm)

File:Vega P404.jpg

Italian Ship Vega, Cassiopia Class, Nov. 2001, by Antoio Munoz Criado

Cassiopea class (Italy), 262x39x12, 1,475 tons fl, 8,800 HP 21 knots, crew 60,  endurance 35 days, 3300 nmi @ 17 knots (probably 5,000 at 12 or 13 knots) 76mm gun and FCS helo deck and hangar.

China Shows 2nd Trimaran Rescue Ship

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China Defense Mashup has posted pictures of a trimaran vessel purported to be the second of a class of rescue vesssels that look very much like smaller versions of the Independence class Littoral Combat Ships. (Click on the photos to enlarge.)

It appears to have a helicopter landing deck, a small gun (25-40mm), and stations for making pickups at near the waterline on the outer hulls. Apparently these belong to the  Navy, rather than one of the five civilian agencies that do Coast Guard type work.

New Motor Surfboat from the Netherlands

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Marine Log has posted a story about a new motor surfboat comparable to the 47 footer being developed for the Royal Netherlands Sea Rescue Institution (KNRM). It has got some interesting features including an “Axe” bow, aimed at maintaining higher speeds in rough water, and a digital communications systems for communicating search information directly into its navigation plotter.

Most of the the information is on a video (10m45s) which also provides background info on the KNRM.

Program Updates from a GAO Report

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September 26, Fiercehomelandsecurity posted a story (“GAO: Not eliminating two National Security Cutters will cause ‘difficult choices'”) on a recent GAO report, “COAST GUARD, Portfolio Management Approach Needed to Improve Major Acquisition Outcomes” (download the report, GAO-12-918 (.pdf)).

I’m going to look at other aspects of the report later, but there were a number of items addressed in the report that readers may not be aware of. This is not an exhaustive list, the report contains even more, but I thought these most interesting. We may have touched on some of  these changes already, but here goes.

General:

“DHS stated that future breaches in Coast Guard programs would almost be inevitable as funding resources diminish.” (p.17)

Maritime Domain Awareness/C4ISR:

Nationwide Automatic Identification System–Indefinitely deferring plan for continuous nationwide coverage. (p14)

Common Operating picture:

“The Coast Guard planned to buy an integrated C4ISR system for each asset to enable greater awareness. As we reported in July 2011, the Coast Guard has spent over $600 million purchasing a C4ISR system that is difficult to maintain and does not yet achieve the system-of systems capability and the Coast Guard’s helicopters are no longer going to be a part of this system” (p.26)

–Neither the OPC or the FRC are expected to be able to exchange near real time “battle data” (tactical data link?) with DOD assets. (p.25)

–Why don’t we use LINK 16 Multifunctional Information Distribution System-Low Volume Terminals on all these platforms?

Fast Response Cutter:

“…the Coast Guard has attributed the more than $1 billion rise in the Fast Response Cutter’s cost to a reflection of actual contract cost from the September 2008 contract award and costs for shore facilities and initial spare parts not included in the original baseline.”

Aviation:

Coast Guard’s Aviation Logistics Center told us they recently identified that the end of service life for the HH-60s and HH-65s could be reached as early as the 2022 time frame—not the 2027 time frame as originally planned. Officials added that this will require the Coast Guard to either buy new HH-60s and HH-65s or conduct a service life extension—previous service life extensions have been funded with acquisition dollars.(p16)

H-65 program: dropping both a helicopter handling, traversing, and securing system and a surface search radar. (p.13)

H-60 Program: deferring indefinitely upgrades to include a surface search radar and C4ISR due to budget constraints. (p.13)

A revise baseline program for C-130s has been forwarded DHS that recommends 11 H models and 11 J models (p.40) (I think this is an increase in the expected number of “J” models.)

Sanity Prevails:

The Coast Guard has dropped its plans to deliver boarding parties on potentially hostile ships by helicopter (p.27)

A Small Bit of Surprisingly Good News:

The National Security Cutter can do 32 knots (“speed is based on the results of an operational assessment” p. 32), making it almost certainly the fastest major cutter ever.